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Direct loans made by bureau on security of adjusted service certificates by stations,
United States Government life insurance fund—Continued
Senator WATSON. You may go ahead.
General HINES. For 1928, taking the first month, November, we made 25,977 loans, aggregating $2,498,391.87.
Senator CouZENS. Why do you say November instead of January?
General HINES. We have not the data for January of that year. Now, taking January, 1929, we made 142,835 loans, which aggregated $10,228,857.14. Now, for 1930, the same month, we made 214,370 loans, which amounted to $14,146,353.90. You will notice that the loans on the 1st of January each year are always larger than for other months of the same year. And it is brought about by the anniversary date of the loan in the certificate. So that taking June of 1929, which seems to be about an average month, or July would be a better month, we made 47,933 loans, which amounted to $4,806,956.94. While in July, 1930, the loan numbered 61,826, or an aggregate amount of $6,076,320.44.
Senator King. I am somewhat confused over those figures: You said for July. Is that for one month alone?
General Hines. Yes; for July, 1929, as against July, 1930. First I gave the number of loans granted and then the amount. Senator King. You made loans each month, did you not? General HINES. Yes; each month.
Senator King. So that the aggregate during the year would be several hundred thousand?
General HINES. That is right. What I was trying to do was to give you now some information by way of comparison, so that if you take the average amount in 1929 and 1930 you will see that they run between five and seven million dollars, while for January of this year they are up to $17,000,000.
Senator LA FOLLETTE. So far as you can will you furnish us with a comparative table by months?
General HINES. Yes; I will put it in by months, from the date when we started up to the present time.
Senator WATSON. General Hines, will you suspend for a moment? Undersecretary of the Treasury Mills would like to make a statement.
General HINES. Certainly.
Undersecretary Mills. Mr. Chairman and gentlemen of the committee, I had understood from Senator Smoot, the chairman of the committee, that the Treasury would not be required to appear until Wednesday. On that assumption we are not ready to discuss these bills at the present time.
Senator HARRISON. But you will be ready on Wednesday?
Undersecretary Mills. We would like to be excused until Wednesday morning, if that is agreeable to the committee?
Senator WATSON. There seems to be no objection. Now, General Hines, you may resume.
Senator LA FOLLETTE. General Hines, before you go on any further, let me ask: You stated that the amounts appropriated each year for this fund had not been as high as you had thought they ought to be, and that some adjustment had been made with the Budget Bureau. How much less was the appropriation as recommended by the Budget each year than that which the bureau should have had or thought should be appropriated?
General Hines. Taking the last year—that is, the estimates which are now before the Congress—and we estimated that that fund should have appropriated to it by January 1 of this next year, 1932, $163,000,000.
Senator LA FOLLETTE. And what did the Budget recommend?
General HINES. The amount recommended was $112,000,000, the same amount we had before, and which is approximately $50,000,000 less than we estimated the fund should have.
Senator HARRISON. Have they cut it down proportionately each year?
General HINES. No; we have run along each year with that amount up to now.
Senator HARRISON. In other words, the Budget each year has recommended your amount.
General ÉINES. No. Each year the Budget has recommended $112,000,000. There is some basis for it, and we know that the actual mortality is running less than the American Experience Tables. The only fear we have to run is that eventually, when we get over the present rate, the mortality will probably start to run ahead of the table, and in that event the appropriations will have to be increased materially, more so than if we got the aggregate amount right straight through. But I feel that there has been no real damage done to the fund up to this time. But if we continued that beyond the 10-year period, then we would have to make up in the end the loan and interest earnings in that fund but not paid in and not at work during all that time.
Senator GEORGE. In other words, you have based your estimate primarily on the American tables of mortality.
General HINES. Yes, sir.
Senator GEORGE. And the Bureau of the Budget has based theirs upon the actual figures so to speak.
General HINES. Yes, sir.
General HINES. Undoubtedly some questions will arise as to the distribution of these certificates by States. I have a statement which I will place in the record. I will not attempt to read off all of these figures, but will tell you what it contains, and then it may go into the record.
(The statement referred to will be placed in the record at this point.)
Adjusted-service certificates in force December 1, 1930, showing State of residence Adjusted-service certificates in force December 1, 1930, showing State of residencem
Senator KING. General Hines, you stated that in some instances the borrower did not meet the obligations to the bank and the Veterans' Bureau paid the bank and took over the veterans' note. In those instances does the borrower make any adjustment or renew the note, or how is it dealt with?
General HINES. No. He could renew the note at any time. But the most of those certificates, I mean that have gone into the fund, are still there. Many of them are small amounts. The men have lost interest in borrowing any more or in redeeming the loan. Of course they are running along at interest in this fund.
Senator SHORTRIDGE. What is the life of the loan?
General HINES. We make them for a year, but renew them at the anniversary date for another year. In other words, we keep the note alive, and we automatically reduce his interest at the date of the anniversary of the loan.
Senator THOMAS of Oklahoma. What percentage of these loans are paid off?
General HINES. Out of the total amount I should say that not more than ten million dollars has been returned, and it is running only about 4 to 5 per cent.
Senator BARKLEY. The great bulk of the borrowers not only renew from year to year, but increase their loans as the value increases?
General HINES. Yes; that is correct. In other words, those who make a new loan either renew the old loan by paying it off and getting an additional amount, or by making a new loan for an increased value.
Now, I am sure that you will require some explanation of a table which has been made up showing the estimated value of these securities in force at this time. That is, what is their present worth as against their face value? I bave a table here that shows from January, 1925, up to 1930, so much in amount of certificates in force as of December 31, 1930, and so much as to amount purchased by the original adjusted-service credit, and so much paid-up value of December 31, 1930, amount of certificates purchased by their original adjusted-service credit, present value of the additional credit earned, and so on. That is, they were given originally a 25 per cent increase over their basic credit. We have calculated how much of that 25 per cent they have actually earned up to this year. In other words, it is six-twentieths for the man whose certificate is dated 1925, and the men running up to last year would have a considerably lesser amount, because their certificates have not been deferred as long. So that we have calculated for each of the years from 1925 up to 1930, and then the present value of the certificates in force.
Senator COUZENS. Suppose you just put it right in there.
(The statement referred to will be furnished by General Hines and inserted at this point.)
Senator Watson. You may proceed.
General HINES. Now, taking the first item, as of December 31, 1930, the estimated amount of certificates in force was, as I have said before, $3,423,404,145. The estimated amount purchased by their basic credit amounts to $2,738,479,615. Estimated paid up value of December 21, on the amount of certificates purchased by the adjusted-certificate credit, the amount of that credit that is actually purchased is $1,628,813,060. The present value probably earned, that is, of the amount of the 25 per cent which the certificates have earned up to date, is $113,707,333. Leaving, then, the present value of the certificates, in other words, what would correspond to cashsurrender value of an insurance policy, as of December 31, 1930, is $1,742,520,393.
Senator COUZENS. In other words, if they were surrendered at that price they would be sacrificing about 50 per cent of their face value.
General HINES. Yes, sir.
Senator GEORGE Have you worked that out in the way of averages? You have estimated the average amount of a certificate now outstanding as about $1,040.
General Hines. Yes; it would run between $512 and $506 per certificate.